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WaFd, Inc.’s (WAFD - Free Report) second-quarter fiscal 2024 (ended Mar 31) adjusted earnings of 73 cents per share handily surpassed the Zacks Consensus Estimate of 31 cents. However, the bottom line declined 13.1% sequentially.
During the reported quarter, WAFD completed the acquisition of California-based Luther Burbank Corporation (LBC).
The results reflected a rise in net interest income (NII) and other income, which aided the top line. Also, higher loan and deposit balances were another positive. However, a rise in expenses and higher provisions acted as spoilsports.
Results in the reported quarter excluded merger-related costs and certain non-operating expenses. After considering those, net income available to common shareholders (GAAP basis) was $12.2 million or 17 cents per share, down from $54.8 million or 85 cents per share in the prior quarter.
Revenues & Expenses
Adjusted net revenues in the quarter were $173.9 million, up 4.1% from the prior quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $168.22 million.
NII came in at $158.6 million, growing 4.2% sequentially. The net interest margin (NIM) was 2.73%, contracting 18 basis points (bps). Our estimates for NII and NIM were $149.5 million and 2.47%, respectively.
Total adjusted other income of $15.3 million increased 3%. Our estimate for the metric was $14.6 million.
Total adjusted other expenses were $101.8 million, up 6.6%. The rise was led by an increase in all the components. Our estimate for the metric was $102.3 million. During the reported quarter, WaFd recorded $25.1 million of merger-related expenses for the LBC deal.
The company’s adjusted efficiency ratio was 58.5%, up from 57.2% sequentially. A rise in the efficiency ratio reflects lower profitability.
As of Mar 31, 2024, net loans receivable amounted to $20.8 billion, up 18.3% from the prior quarter. Total customer deposits were $21.34 billion, jumping 33.1%. The rise in both metrics was driven by the LBC deal completion.
At the end of the fiscal second quarter, the adjusted return on average common equity was 8.74%, down from 10.19% at the end of the prior quarter. Adjusted return on average assets was 0.88%, down from 1.04% at the end of the previous quarter.
Credit Quality: A Mixed Bag
As of Mar 31, 2024, the allowance for credit losses (including reserve for unfunded commitments) was 1% of gross loans outstanding, down 4 bps from the prior quarter end. Also, the ratio of non-performing assets to total assets was 0.23%, down 1 bp.
In the reported quarter, the provision for credit losses was $16 million, compared with nil provisions in the previous quarter.
Share Repurchase Update
During the quarter, WAFD repurchased 7,837 shares at an average price of $30.38 per share. As of Mar 31, 2024, approximately 1.85 million shares remained available under the authorization.
Our Viewpoint
Decent loan growth, higher interest rates and a robust balance sheet will likely continue aiding WAFD’s financials. The LBC acquisition would allow the company to foray into California and will be 8% accretive to earnings in fiscal 2025.
However, elevated expenses and an expected economic slowdown are near-term headwinds.
BankUnited, Inc.’s (BKU - Free Report) first-quarter 2024 earnings of 64 cents per share surpassed the Zacks Consensus Estimate of 62 cents. In the prior-year quarter, the company had reported earnings of 70 cents. The just-reported quarter’s earnings included expenses related to FDIC special assessment.
BKU’s results were aided by an increase in non-interest income and deposits and a decline in provisions. However, lower NII and loan balance, along with higher expenses, were the undermining factors.
First Horizon Corporation’s (FHN - Free Report) first-quarter 2024 adjusted earnings per share of 35 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 22.2% year over year.
FHN’s results primarily benefited from the rise in fee income. However, the fall in NII and loan balances, coupled with a rise in operating expenses, was an undermining factor.
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WaFd (WAFD) Q2 Earnings & Revenues Beat, LBC Deal Boosts Loans
WaFd, Inc.’s (WAFD - Free Report) second-quarter fiscal 2024 (ended Mar 31) adjusted earnings of 73 cents per share handily surpassed the Zacks Consensus Estimate of 31 cents. However, the bottom line declined 13.1% sequentially.
During the reported quarter, WAFD completed the acquisition of California-based Luther Burbank Corporation (LBC).
The results reflected a rise in net interest income (NII) and other income, which aided the top line. Also, higher loan and deposit balances were another positive. However, a rise in expenses and higher provisions acted as spoilsports.
Results in the reported quarter excluded merger-related costs and certain non-operating expenses. After considering those, net income available to common shareholders (GAAP basis) was $12.2 million or 17 cents per share, down from $54.8 million or 85 cents per share in the prior quarter.
Revenues & Expenses
Adjusted net revenues in the quarter were $173.9 million, up 4.1% from the prior quarter. Moreover, the top line surpassed the Zacks Consensus Estimate of $168.22 million.
NII came in at $158.6 million, growing 4.2% sequentially. The net interest margin (NIM) was 2.73%, contracting 18 basis points (bps). Our estimates for NII and NIM were $149.5 million and 2.47%, respectively.
Total adjusted other income of $15.3 million increased 3%. Our estimate for the metric was $14.6 million.
Total adjusted other expenses were $101.8 million, up 6.6%. The rise was led by an increase in all the components. Our estimate for the metric was $102.3 million. During the reported quarter, WaFd recorded $25.1 million of merger-related expenses for the LBC deal.
The company’s adjusted efficiency ratio was 58.5%, up from 57.2% sequentially. A rise in the efficiency ratio reflects lower profitability.
As of Mar 31, 2024, net loans receivable amounted to $20.8 billion, up 18.3% from the prior quarter. Total customer deposits were $21.34 billion, jumping 33.1%. The rise in both metrics was driven by the LBC deal completion.
At the end of the fiscal second quarter, the adjusted return on average common equity was 8.74%, down from 10.19% at the end of the prior quarter. Adjusted return on average assets was 0.88%, down from 1.04% at the end of the previous quarter.
Credit Quality: A Mixed Bag
As of Mar 31, 2024, the allowance for credit losses (including reserve for unfunded commitments) was 1% of gross loans outstanding, down 4 bps from the prior quarter end. Also, the ratio of non-performing assets to total assets was 0.23%, down 1 bp.
In the reported quarter, the provision for credit losses was $16 million, compared with nil provisions in the previous quarter.
Share Repurchase Update
During the quarter, WAFD repurchased 7,837 shares at an average price of $30.38 per share. As of Mar 31, 2024, approximately 1.85 million shares remained available under the authorization.
Our Viewpoint
Decent loan growth, higher interest rates and a robust balance sheet will likely continue aiding WAFD’s financials. The LBC acquisition would allow the company to foray into California and will be 8% accretive to earnings in fiscal 2025.
However, elevated expenses and an expected economic slowdown are near-term headwinds.
WaFd, Inc. Price, Consensus and EPS Surprise
WaFd, Inc. price-consensus-eps-surprise-chart | WaFd, Inc. Quote
Currently, WAFD carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
BankUnited, Inc.’s (BKU - Free Report) first-quarter 2024 earnings of 64 cents per share surpassed the Zacks Consensus Estimate of 62 cents. In the prior-year quarter, the company had reported earnings of 70 cents. The just-reported quarter’s earnings included expenses related to FDIC special assessment.
BKU’s results were aided by an increase in non-interest income and deposits and a decline in provisions. However, lower NII and loan balance, along with higher expenses, were the undermining factors.
First Horizon Corporation’s (FHN - Free Report) first-quarter 2024 adjusted earnings per share of 35 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 22.2% year over year.
FHN’s results primarily benefited from the rise in fee income. However, the fall in NII and loan balances, coupled with a rise in operating expenses, was an undermining factor.